Carl Celian Icahn asks Apple to buy back its shares citing future value

Carl Celian Icahn, the American businessman, shareholder and investor of Icahn Enterprise has advised Apple to buy back more of its shares using the $130 billion cash hoard. In a letter to Apple’s CEO, Tim Cook, he said the tech giant is dramatically undervalued, and if Apple buys their majority of stocks back, the investors will get benefits. According to Carl the present value of Apple’s share is half of what it should be and there will be a rise in the prices in the near future.

Carl Icahn owns 53 million Apple shares at the moment and has already launched a successful campaign for Apple to give more returns to their shareholders. Apple said that it would return $130 billion of cash to the shareholders, making it one of the biggest shareholder windfalls and Icahn was quick to claim victory. At 53 million shares, he is in the top investor’s list and has urged the company to raise its dividends. Icahn has always praised Apple’s decisions in the past. He said that larger screen size made Apple’s iPhone6 directly comparable with Samsung’s Galaxy S5 and Note 4, making the choice between the two smartphone to the choice between a Volkswagen over a Mercedes at the same price. Carl said that he was really looking forward to the performance Apple’s iWatch in the market. He and Apple are relying on the gadget to provide a boost for the company’s growth. The letter caused, some might say, a minor effect as Apple shares were up by 1pc at $101.78 in premarket trading on Thursday. According to StarMine’s Intrinsic Valuation model, Apple stock should be trading at $111.4. That implies a compounded annual earnings growth rate of 8 percent over the next 10 years, StarMine data showed. The letter was also written to reassure the investors that his hedge fund will hold on to Apple shares.

Many experts and analysts disagreed and criticized Icahn and other investors who have opted for a short-term approach toward the stock pricing, in order to make a quick profit by selling their shares. Still, Icahn’s advice seems rather sound initially; if you feel your shares are undervalued by the market you should take advantage of Wall Street’s myopia by buying your shares back at a discount. As the market rises and the value of your stocks increases, each shareholder’s profits get increased. Icahn has said that he will be publishing his investment ideas on Facebook and other social media sites in addition to Twitter.  Apart from this announcement, he has been already tweeting his opinions about investment strategies. This has not appealed to the other investors who are a bit unsettled by Carl’s actions. While responding to the media about the letter, Apple said that it is always nice to hear from our investors. However, Apple has made clear before that it will not be pressurized by anyone to make hasty decisions.